Correlation Between Visa and Nedbank
Can any of the company-specific risk be diversified away by investing in both Visa and Nedbank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Visa and Nedbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Nedbank Group, you can compare the effects of market volatilities on Visa and Nedbank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Visa with a short position of Nedbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Nedbank.
Diversification Opportunities for Visa and Nedbank
Good diversification
The 3 months correlation between Visa and Nedbank is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group and Visa is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Visa Class A are associated (or correlated) with Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of Visa i.e., Visa and Nedbank go up and down completely randomly.
Pair Corralation between Visa and Nedbank
Taking into account the 90-day investment horizon Visa is expected to generate 1.48 times less return on investment than Nedbank. But when comparing it to its historical volatility, Visa Class A is 1.26 times less risky than Nedbank. It trades about 0.11 of its potential returns per unit of risk. Nedbank Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,281,856 in Nedbank Group on September 1, 2024 and sell it today you would earn a total of 605,944 from holding Nedbank Group or generate 26.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Visa Class A vs. Nedbank Group
Performance |
| Timeline |
| Visa Class A |
| Nedbank Group |
Visa and Nedbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Nedbank
The main advantage of trading using opposite Visa and Nedbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Nedbank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nedbank will offset losses from the drop in Nedbank's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Nedbank vs. Zeder Investments | Nedbank vs. Deneb Investments | Nedbank vs. Hosken Consolidated Investments | Nedbank vs. Copper 360 |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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